Madrigal vs. Rafferty

G.R. No. L-12287            August 7, 1918

VICENTE MADRIGAL and his wife, SUSANA PATERNO, plaintiffs-appellants, 
vs.
JAMES J. RAFFERTY, Collector of Internal Revenue, and VENANCIO CONCEPCION, Deputy Collector of Internal Revenue, defendants-appellees.

Vicente Madrigal and Susana Paterno were legally married and have conjugal partnership.

Madrigal filed his total net income for the year is P296,302.73.

Subsequently, Madrigal submitted the claim that the said total net income of year 1914 did not represent his income for the year 1914, but was in fact the income of the conjugal partnership existing between himself and his wife, and the computing and assessing the additional income tax provided by the Act of Congress of Oct. 3, 1913, the income declared by Madrigal and the other half of Paterno.

Madrigal and Paterno brought action against Collector of Internal Revenue and the Deputy Collector of Internal Revenue for the recovery of the sum P3,786.08.

The burden of the complaint was that if the income tax for the year 1914 had been correctly and lawfully computed there would have been due payable by each of the plaintiff the sum of P2,921.09, which taken together amount of P5842.18 instead of P9,668.21.

Issue: WON the additional income tax should be divided into equal parts because of the conjugal partnership existing between them?

Held:

NO.

Paterno has an inchoate right in the property of her husband Madrigal during the lifetime of the conjugal property.  She has an interest in the ultimate ownership of property acquired as income of the conjugal partnership. Not being seized of the separate estate, Paterno cannot make a separate return in order to receive the benefit of the exemption which would arise by reason of the additional tax.  As she has no estate or income, actually and legally vested in her and entirely distinct from her husband property, the income cannot properly be considered the separate income of the wife for the purpose of the additional tax.  The income tax law does not look on the spouses as individual partners in an ordinary partnership.

The higher schedules of the additional tax directed at the incomes of the wealthy may not be partially defeated by reliance on provisions in our Civil Code dealing with the conjugal partnership and having no application to the Income Tax Law.